World Banks says two years of intifada caused Palestinian economic crisis

The continued closures, sanctions and curfews imposed on Palestinians over the past two years of the intifada have caused a Palestinian economic crisis with 60% of the population of the West Bank and Gaza living under a poverty line of US $2 a day, said the World Bank today in a newly released report.

The continued closures, sanctions and curfews imposed on Palestinians over the past two years of the intifada have caused a Palestinian economic crisis with 60% of the population of the West Bank and Gaza living under a poverty line of US $2 a day, said the World Bank today in a newly released report.

The bank’s report painted a dim picture of Palestinian living conditions and a declining gross national income per capita (GNI) that has fallen to half of what it was two years ago. The report said the situation is further exacerbated by a 9% growth in population and an unemployment rate of 53%.

GNI losses reached $5.4 billion over the two-year intifada, equal to GNI in 1999. The opportunity cost said the bank, is now equivalent to one full year of Palestinian wealth creation.

“The Palestinian Authority’s (PA) financial situation remains precarious,” said the report. “As a result of rising unemployment, reduced demand and the Government of Israel’s withholding of taxes collected on the PA’s behalf, monthly revenues dropped from US$91 million in late 2000 to US$19 million today.”

So far the collapse of the PA has been averted by donor budget support put at $1.1 billion over the last two years providing a monthly salary to 125,000 people. With unemployment rising and incomes collapsing, over half a million Palestinians are now dependent on food aid as food consumption has dropped by up to 30% since the start if the intifada in September 2000.

“Continued high levels of donor assistance are vital, but they cannot prevent further economic decline. Under closure, every additional billion in foreign aid will only pull down the poverty rate by about 6 percentage points. This is not a crisis that can be resolved alone,” said Nigel Roberts, the World Bank’s country director for the West Bank and Gaza.

The underlying tone of the report was that the prospect of improving the situation is slim unless a political solution is reached. If donors were to double their US$1 billion, the poverty rate would fall from 75% to 54% by the end of 2004, said the World Bank in its report.

“As agreed framework for political progress remains indispensable to re-establish the conditions for the resumption of economic and social development in both Israel and the Palestinian territories, said Roberts.

The World Bank says while the Palestinian Authority’s move towards reforming Palestinian governance is to be commended; the PS needs to develop a national emergency plan to cope with further economic hardships. The report says there is no going back on reform and that the legitimacy of the PA is now tied to the successful delivery of the reform program.

“Much has been done to repair the credibility of the PA in the eyes of the international community. There is now no way back — having acknowledged the need to combat corruption and to transform itself into a democratic, modern and accountable instrument of statehood, the PA must deliver a successful reform program or lose its legitimacy,” the bank said.